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South Africa Introduces Solar Panel Tax Incentives For Homes

In his National Budget Speech on 22 February, South Africa’s Minister of Finance Enoch Godongwana announced some new short term tax incentives for South Africans to go solar.

This is in a bid to help people go solar to help increase the contribution of distributed solar, as well as cushion citizens from the unprecedented levels of load-shedding.

However, inverters and battery storage are not covered by the new incentives, which is a real shame, as catalyzing the adoption of home solar to store self-generated solar power would go a long way to cushion homes and businesses. The other weird thing is that the incentives are just for one year for homes. The government says this is to “encourage investment as soon as possible.” However, South Africa’s electricity crisis is so dire that load-shedding will probably not go away in the next two years or so. It would have been great to have this incentive program run for at least three years for homes. Still, the introduction of this incentive program is a good start. Let’s hope there will be some iterations and extensions in the near future.

Here is a look at the incentive program for the residential sector:

  • Individuals who pay personal income tax can claim the rebate against their tax liability.
  • Individuals will be able to claim a rebate to the value of 25% of the cost of new and unused solar photovoltaic (PV) panels, up to a maximum of R15 000 per individual.
  • For example, a person buys 10 solar PV panels, at a cost of R4000 per panel (so total cost of R40,000). That person would be able to claim 25% of the cost up to R15,000, so R10,000. A different person is able to buy 20 panels at a cost of R4000 per panel (so total cost of R80,000). The calculation of 25% adds up to R20,000, but they can only claim R15,000.
  • Only new and unused solar PV panels qualify, to ensure that the capacity is in addition to what the country already has in place. The panels can be installed as part of a new system, or as an extension of an existing system.
  • Only solar PV panels with a minimum capacity of 275W per panel (design output) qualify for the rebate.
  • Other components of a system — batteries, inverters, fittings, or diesel generators — and installation costs do not qualify. Portable panels will also not qualify.
  • Solar PV panels must be installed at a residence that is mainly used by an individual for domestic purposes. The installation will have to be proved with a certificate of compliance in terms of the Electrical Installation Regulations, 2009 to ensure safety of the installation and compliance to electric regulations.
  • The solar PV panels must form part of a system that is connected to the mains distribution of the private residence.
  • The rebate applies to qualifying solar PV panels that are brought into use for the first time in the period from 1 March 2023 to 29 February 2024.
  • There is no ownership limitation for the incentive, so installations by landlords or renters would be eligible, but only the party that pays for the solar panels can claim the rebate.

R15,000 is $823. It’s a good start, however it would have been better if this had been set to at least $2,000 and perhaps up to $5,000 when including approved battery storage systems to a solar installation, depending on energy storage capacity. This would have really helped the adoption of residential energy storage systems. One does need a battery for backup during load-shedding, so it is strange that storage is not included.

The incentives for businesses look a lot better. From 1 March 2023, businesses will be able to reduce their taxable income by 125% of the cost of an investment in renewables. There will be no thresholds on the size of the projects that qualify, and the incentive will be available for two years to stimulate investment in the short term. Again, two years is a good start, but it would have been better to have this run for 3 or 5 years for businesses. For businesses, the statement says for “an investment in renewables,” that means solar PV, wind, and hydro all qualify. Will this apply to storage systems bundled with solar? Not sure, but I do hope so as this will really catalyze the adoption of battery storage in the C&I sector. For example, South Africa’s largest supermarket chains are spending millions on diesel to mitigate the impact of load-shedding. Incorporating large batteries as part of their microgrids will help reduce the dependence on this expensive diesel.

The effects of load-shedding on homes and businesses have been so brutal, and the South African Reserve Bank says that during the higher stages of load-shedding, where consumers can experience 12 hours of load-shedding per day, South Africa loses up to R900 million ($50 million) per day. This Tuesday, for the first time, South Africa’s national utility company implemented Stage 7 load-shedding. They shed a whopping 7,045 MW! To put that into perspective, that is like switching off two countries with the installed capacity of Kenya. This was due to a record amount of plant capacity being unavailable due to scheduled maintenance and mostly breakdowns at its aging coal power plants.

South Africa has an installed generation capacity of about 50,000 MW but, quite often, about  20,000 MW of this is often unavailable due to those reasons. Peak demand is usually around 30,000 MW in the summer and a lot more in the winter. According to Eskom, on Tuesday evening, the demand was about 30,480 MW, but the available generation from Eskom’s fleet was only 23,289 MW, hence the need to shed 7,045 MW. It could have been worse had it not been for about 1,262 MW from some utility-scale renewables (791 MW from wind and 390 MW from concentrated solar plants) as well as additional contributions from Eskom’s own, plus independent power producers’ emergency open cycle gas turbines. Eskom has had to burn a lot of diesel to help the dire power situation, which is not a cheap exercise. An urgent solution to the power crisis is needed ASAP. These new incentives are a good start.

Source : Clean Technica